Trade Adjustment Assistance: More needed to help Ohio communities

Trade Adjustment Assistance: More needed to help Ohio communities

Promoters of the North American Free Trade Agreement (NAFTA) promised that free trade would lead to shared economic expansion, a “rising tide to lift all boats.” President Clinton said NAFTA would bring the U.S. wage growth and 200,000 more jobs.[1] Instead, NAFTA cost the U.S. an estimated 683,000 jobs in its first 16 years alone.[2] About two-thirds of the direct job loss came from the relatively high-paying manufacturing sector.[3] This made the Midwest, including Ohio, particularly vulnerable to the negative consequences of corporate globalization.

U.S. trade policy helped foster two decades of stagnant or declining wages in the U.S. and Mexico.[4] According to the Economic Policy Institute (EPI), instead of expanding opportunity in Mexico, Mexican workers experienced post-NAFTA wage stagnation. Mexican manufacturing productivity rose 80 percent between 1994 and 2011, but real wages fell about 20 percent.[5] Mexican auto parts workers earn about 12 percent of the wages of their U.S. counterparts. In 2014, Mexico’s poverty rate was higher than it was when NAFTA began. NAFTA and subsequent similar agreements prioritized the interests of global investors over all other stakeholders. Instead of lifting them with a rising tide, NAFTA-style free trade sunk workers in the U.S. and abroad.

Job displacement is an expected and planned-for consequence of trade pacts. The Trade Adjustment Assistance Act (TAA) is the primary way the United States attempts to mitigate the harm to families and communities from trade-related job loss. The program offers a comprehensive set of supports to trade-dislocated workers, including retraining and relocation assistance, cash support and help with health insurance costs. Its benefits are robust, particularly compared to regular unemployment compensation, and it provides a pathway into new careers for many workers. More than 124,000 Ohio workers were covered by TAA certifications between 2001 and 2015.[6] EPI estimates that the state lost almost as many jobs (121,500) during that period to the U.S. trade deficit with China alone. TAA is a lifesaver for the thousands or workers and their families who used the assistance to rebuild after a job loss. TAA is also an inadequate remedy to the inequities and downward wage pressure NAFTA-style trade has spread across the economy.

TAA was initially limited by eligibility rules and the program continues to have a complex two-step application process, and restricted funding. Over time, TAA rules have broadened to include more trade-impacted groups, including service workers, suppliers and finishers to trade-impacted firms, and workers whose jobs moved to any country, not just to nations with an existing trade agreement with the U.S. Some of these expansions were in response to the recession and the need to rapidly retrain and keep spending alive in hard hit communities. Longer-term TAA reauthorizations, however, were largely sweeteners to make passing new trade acts politically palatable. Given the scale of trade-related job loss, TAA cannot be an afterthought or bargaining chip. The program must be more aggressive if it is to really mitigate job loss. But even a robust TAA program will not offset the economy-wide decline in wages and the structural imbalance of negotiating power between global investors and workers at the heart of NAFTA-style trade pacts.

Policy Matters has issued several reports on TAA in Ohio. In these reports, we call for greater state outreach to potentially eligible workers, broader federal rules, and additional funding for program administration. Those changes are still needed. The very process of trade negotiations must evolve to give workers a full seat at the bargaining table to address the economy-wide consequences.

The Trade Adjustment Assistance Reauthorization Act of 2015 (TAARA 2015, TAA) is the latest iteration of TAA. TAARA 2015 reauthorized the program for six years and reduced funding to states.[7] The law also triggered automatic review of petitions filed since January 1, 2014. TAA has a two-step eligibility process. The company, the union, a group of three or more workers, or the state can file a petition for certification with the DOL if they do so within a year of the triggering layoff event. The Department of Labor determines TAA eligibility for the worker group. Once the worker group is certified, ODJFS determines individual worker eligibility for specific TAA benefits.

Worker groups currently eligible to apply for TAA include manufacturing and service sector workers who meet one of these criteria:

Certified by the International Trade Commission as an industry injured or harmed by a market disruption;

Lost jobs because of a decline in production (outsourcing) to any country;

Lost jobs because of an increase in imports; or,

Are secondary workers who have lost jobs as upstream suppliers or as downstream assemblers or finishers to a trade-affected company.[8]

TAA provides several supports to certified, eligible workers:

Trade readjustment allowances (TRA) to certified eligible workers. TRA are cash payments to workers enrolled in a full-time training course. TRA is available for up to 130 weeks and workers must enroll in training within 26 weeks of certification or layoff. Some workers can receive TRA without enrolling in training if they qualify for a waiver. Waivers are available if the worker has a health condition, no training program is available, or if the training’s enrollment date is not imminent.

Job search allowances: Can cover 90 percent of travel and transportation costs of an out of area (50 miles) job search up to $1,250.

Relocation allowances: 90 percent of relocation costs, and some states offer an additional lump sum payment of $1,250.

Reemployment Trade Assistance: A wage supplement for workers aged 50 and over who take a job that pays less than $50,000. Total income support limited to $10,000; and,

Funding for TAA was reduced in the 2015 act. The 2009 program, which was part of the American Recovery and Reinvestment Act to help the U.S. recover from the last recession, provided up to $575 million to fund training and sent additional dollars to the state for administration, employment services, and other aspects of TAA.[10] This increased capacity, but it was short-lived. In 2011, the cap remained at $575 million, but that pot of funding had to cover nearly all aspects of running the program. Now, funding is capped at $450 million. Funds must cover training, job search, relocation allowances, case management, employment services, and state administration. Last year, Ohio received more than $25 million in federal funding to support TAA. No more than 10 percent of that can be spent on state administration and at least 5 percent must be spent on case management and employment services. Unspent state funds can eventually be redistributed to states in need by the DOL.

TAA certifications, covered workers and job loss in Ohio

TAA only covers a fraction of Ohio workers affected by trade. In Ohio, an estimated 124,054 workers were covered by TAA certifications between 2001 and 2015.[11] Given that EPI has found that Ohio lost about as many jobs just to the U.S. trade deficit with China over that period (121,500), it is clear that only a fraction of workers affected by trade are eligible for TAA and an even smaller share are getting training assistance through the nation’s primary trade impact mitigation program.[12]

The annual number of certified workers peaked in 2009 at 22,214. The number of covered workers reached an annual low in 2014. Fewer than 2,000 workers were certified that year. The decline stopped in 2015. Last year, Ohio saw 3,790 workers certified. Figure 1 shows the estimated number of Ohio workers covered by TAA certifications from 2000 through 2016, by calendar year.

The post-recession totals in particular should concern policymakers interested in helping trade-impacted communities. The jump in certified workers in 2009 is evidence that the TAA stimulus expansion, which relaxed eligibility rules and increased funding both for services and state administration, was well used in Ohio. Trade-impacted workers needed more help to become reemployed during the recession year and the state was better positioned to provide that help. The 2009 changes made manufacturing, service, and public workers eligible and covered production shifts to any country, not just member nations to trade agreements, eligible for assistance. That expansion helped a relatively large number of workers dislocated by trade during the 2007 recession. By 2011, those rules and the funding were rolled back, and the number of impacted workers covered in Ohio declined, as the Ohio job market continued to slowly recover from the recession.

Ohio still struggles to close the job gap. As of September 2017, Ohio needed 22,700 jobs to return to the 2007 employment level. This includes jobs lost to the recession and jobs needed to keep pace with population growth.[13] 2016 was Ohio’s worst year for job growth since the end of the recession and the recovery has not been spread evenly across the state.[14] It is not surprising that workers facing a layoff were looking for additional supports. Workers losing their jobs sought reemployment assistance in a tough economy and some found that help through TAA. Figure 2 shows the total number of petitions certified by year since 2000.

TAA certifications remain elevated in 2017

Despite rhetoric promising a resurgence of jobs, the TAA data shows that 2017 has brought little relief. So far, 31 petitions have been filed this year and 21 have been certified. As of November, there were 3,615 workers covered, just 175 less than last year’s total. The majority of certifications were due to outsourcing (nine petitions, 2,100 workers). Imports caused the loss of an estimated 1,078 jobs. Downstream and upstream impacts resulted in TAA certifications for 437 workers.

Changing impacts in Ohio

Since the 2014 recession, a growing share of workers are certified because their jobs left the country, rather than because of import competition. Import competition was responsible for a little more than half (55 percent) of jobs lost in 2009 and for 76 percent of TAA covered jobs lost in 2014. Last year, 84 percent, more than 3,173 covered workers, lost their jobs to outsourcing. This is a small, but meaningful shift. Outsourcing means that work relocates to another place, often to a country where workers are paid less than domestic workers for the same job.

The number of workers certified because they worked for an upstream supplier or downstream producer of a trade-impacted firm has also shrunk over the course of the recovery to almost negligible levels. Last year only 20 workers were covered by those types of petitions. Figure 3 shows these changes.

In 2013, the majority of petitions were filed by state workers. Last year, the state filed only 22 percent of all certified petitions. Employers have taken on more of the filing responsibility, slightly eclipsing unions, which also filed a larger share of petitions than in prior years. Given the smaller role of the state, it is possible that some eligible workers may not understand they are trade impacted, particularly if they work at upstream or downstream firms. These categories of eligibility are less obvious, and are now only a small sliver of TAA certifications. Greater state administration assistance and outreach may help more employers and workers identify as trade impacted. Additional designated funds for TAA administration could help ensure that state employees are helping everyone who needs and deserves assistance. Figure 4 shows these changes.

Only 28 of the petitions certified last year included information about the origin of competitive imports or where the filers believed work was moving. Three of those 28 were certified due to import competition and they listed Australia, “Asia” and “foreign country” as competing nations. The remaining 25 were outsourcing certifications. Eight petitions cite Mexico, three cited India, two referenced China. Six petitions only cited “foreign country” as the place where their work was moving. Table 1 details these locations.

There is so little information in the TAA petitions about where work moved or where imports originated that it is unwise to make too much over the trends in this data. Jobs are leaving not only to nations with weaker labor and environmental standards, but also to nations with higher standards, such as Canada. Canada’s priorities for the ongoing renegotiation of NAFTA include low wages in Mexico and so-called right-to-work laws in the U.S., two practices that have weakened labor standards for all workers, not just those directly affected by trade.[15]

Largest TAA certifications in 2016

The largest TAA certification in 2016 covered an estimated 528 workers at Siemens Energy in Mount Vernon and Norwood. These workers made turbines, compressors and electric motors. All but one of the ten largest certifications covered production workers. The lone service certification in the top ten covered call center workers at Magy Staffing in Holland, Ohio.

Ohio could take action to protect these workers. House Bill 245, idling in the House Committee on Economic Development, Labor and Commerce Committee since June, would require call center employers relocating to a foreign country provide 120-day notice to the Ohio Department of Job and Family Services. The bill would then require ODJFS to produce a report on corporations leaving the US every six months and bars them from receiving state grants, loans, tax benefits and other incentives. It also requires state agencies to keep their call center work in Ohio.[16] Table 2 lists these petitions by the number of impacted workers.

TAA clusters in the Northeast and Southwest

Unsurprisingly, TAA certifications clustered in counties with more blue-collar jobs, as shown in Figure 5. Losses add up and hurt the whole region. Manufacturing losses have an outsized negative impact on income growth and unemployment.[17] Last year, six petitions near Cuyahoga County covered more than 500 jobs, as did seven in southwest Ohio. Two in Knox and Coshocton counties covered more than 700 jobs.

TAA performance in Ohio

TAA provides cash support and training assistance to workers. Between September 2015 and October 2016 2,049 Ohioans received training assistance. Over that same time, 422 exited the program. Nearly fourth-fifths of exiters entered employment, and had a six-month earnings average of $19,471. In 2016, median earnings for all workers over the age of 16 was $31,289, or about $15,644 at the six-month mark, slightly less than the TAA exiters' six-month average.[18] Ohio’s input performance, the number of workers signing up for TAA and participating in training, was good enough to rank us in the top 10 of states. TAA output performance, based on how well TAA participants do in the economy after they leave the program, however is lacking and reflects in part, the regionally sluggish Ohio economy.

TAA data, though sparse, show that trade-related job loss trended upward in 2016. Trade-driven layoffs increased. More layoffs were due to jobs moving overseas, many to Mexico. These trends continued through 2017. This subtle but meaningful shift happened while then-candidate Trump used racist and nationalistic rhetoric to denounce NAFTA as a bad deal, and oppose the then-pending Trans-Pacific Trade Partnership. As Jeff Faux with the Economic Policy Institute has written, the anti-trade message worked because it correctly points out that trade agreements, like NAFTA, have caused deep economic harm, but the cause of that harm Trump cited is dangerously wrong.[19] Faux explains the true root of the problem this way:

The problem for American workers is not international trade, per se. America has been a trading nation since its beginning. The problem is, rather, the radical new rules for trade imposed by NAFTA—and copied in the myriad trade deals signed by the U.S. ever since—that shifted the benefits of expanding trade to investors and the costs to workers.

NAFTA-style free-trade agreements created economic winners and losers, but the winners are not the brown and black workers living in other countries, so demonized by President Trump. Rather, the global investors, who have had crucial say in the rules to open U.S. markets, drive down worker protections, worker bargaining power and industrial regulation, and create broad protections for corporate investors, have seen the benefits of trade. Workers, not just the stereotypical white, male, blue-collar workers, but workers broadly, including those in the global south, share their fate as free-trade losers. This underscores the need for a trade policy rebalancing that puts all workers—domestic and international—in a position of power.

TAA has the potential to improve the lives of Ohio workers who find themselves out of work due to trade. Thousands of workers who used the program have found new, fulfilling career paths. The program is not ineffective, but it could do much more for trade-impacted workers. Shifting eligibility standards have been narrowed since the end of the stimulus act, so fewer worker groups are covered. Topline funding for the program has stayed stable, but those funds have to cover more program costs, including activities that would increase outreach so more worksites can be covered and more workers understand the supports available through TAA. The scale of trade-related job loss has been staggering particularly in Midwestern states like Ohio. For TAA to achieve a more adequate measure of mitigation, eligibility must be broadened and funding must be increased.

It should also be clear that even a robust TAA program cannot fully mitigate the negative impacts of trade on Ohio communities. It is a necessary support, but a much broader set of investments and protections are needed to address the inequities caused by trade here and abroad. New research from the Federal Reserve Bank of Cleveland finds that manufacturing job losses in Rust Belt states like Ohio drive non-manufacturing job losses more than in other regions – including service-oriented regions and other more manufacturing-oriented areas.[20] To strengthen our Ohio economy and give workers a voice in trade policy, Policy Matters Ohio recommends a series of state and federal investments:

Rebuild our infrastructure and make wind and solar energy investments to promote sustainability, and jobs for unionized workers making, assembling and installing new structures;

Support Manufacturing Extension Partnerships and “Buy American” requirements for public spending at all levels of government, including transparency and debarment protections proposed in HB 245;

Continue to invest in TAA and other worker training programs, including the Workforce Innovation and Opportunity Act and registered apprenticeships;

Improve and include environmental protections in trade renegotiations; and,

Trade pacts have significantly reduced bargaining power for workers across the globe. Workers and their representatives have little ability to object to sweatshop conditions or labor law violations. At most they can call for consultations that have no enforcement mechanisms. During NAFTA renegotiations, Canada declared the labor laws in both Mexico and the U.S. to be so poor that they provide an unfair and unjust competitive advantage.[22] Specifically, Canada called for an end to so-called right to work laws. These laws weaken unions.[23] The Economic Policy Institute has demonstrated that weaker unions lower wages across the labor market. Their study found that worker wages were 3.1 percent, or $1,558, lower in right-to-work states.

Our current trade rules favor multi-national corporations and their investors over workers and communities. Many multinational corporations that once employed people here have instead located in places with lower wages, fewer environmental regulations, and weaker labor regulations. NAFTA and other trade act rules made that shift easier. TAA’s promises of loss mitigation made it easier to enact trade agreements. We need to negotiate trade agreements in ways that put workers ahead of multinational corporations. And we need to take better care of more of the workers left behind.

A note about the data

The data sources we use for our TAA reports has changed over time. For this reason, our reports should not be compared to each other.

The Department of Labor’s website now has more complete state-level annual data available on the number of petitions and workers impacted. We use this data when possible, but the aggregate data does not include details such as where work is relocating, which can provide insight into how trade is affecting Ohio. For that level of detail, we compiled our own database based on information found in individual TAA petitions.

[5] Jeff Faux, “Trump is right to criticize NAFTA—but he’s totally wrong about why it’s bad for America,” The Economic Policy Institute, February 2017, available at http://bit.ly/2yIESIS, accessed September 25, 2017.

[10] The 2009 program was also capped at $575 Million but the cap only applied to training funds. The federal government provided an addition 15 percent of the amount used for training for state administration, employment services, and case management. Job search and relocation allowances were separately funded and states received $350,000. See, U.S. Department of Labor, Side-by-Side Comparison of TAA Program Benefits under the 2002 Program, 2009 Program, 2011 Program, and 2015 Program, http://bit.ly/2AtujXp, accessed September 26, 2017.

[12] Similar comparisons were made at the national level in Ramya M. Vijaya’s report “Broken Buffer: How Trade Adjustment Assistance Fails American Workers,” http://bit.ly/2zsTNpU, accessed September 26, 2017.

[13] The Economic Policy Institute, Ohio Job Deficit, calculated using CES, total nonfarm jobs. Ohio has experienced 3.0 percent population growth in the 117 months since the recession began.